Steve Jobs threatened Palm with patent suit if it objected to no-poaching pact

Former Apple CEO Steve Jobs threatened Palm with a patent lawsuit if it did not enter into an agreement in which the companies pledged not to hire employees from each other, unsealed court documents show.

Jobs threatened Palm with litigation in 2007, according to a written affidavit by former president and CEO of Palm, Edward Colligan, made public by the U.S. District Court for the Northern District of California on Tuesday. The documents were revealed in an antitrust lawsuit concerning no-poaching agreements among high-tech companies.

The released documents are part of a private antitrust suit from five former software engineers who worked at Adobe, Intel, Lucasfilm and Intuit. The former employees allege that seven technology companies including Apple, Intel, Adobe and Google conspired to eliminate competition for skilled labor to suppress compensation and the mobility of employees.

In August 2007, Colligan received a call from Jobs, who was concerned about employees that had moved between the two companies in the months before, Colligan wrote. "On the call, Mr. Jobs expressed concern about employees being hired away from Apple by Palm. As a solution, Mr. Jobs proposed an arrangement between Palm and Apple by which neither company would hire the other's employees, including high tech employees," he wrote.

"Mr. Jobs also suggested that if Palm did not agree to such an arrangement, Palm could face lawsuits alleging infringement of Apple's many patents," he said, adding that he did not agree to Jobs' proposal and Palm continued to hire employees from Apple.

Similar allegations of Apple threatening Palm with a patent suit over the same no-poaching proposal were also raised in 2009.

"Your proposal that we agree that neither company will hire the other's employees, regardless of the individual's desires, is not only wrong, it is likely illegal," Colligan wrote in an email sent to Jobs declining to accept his offer. The email was also published by the court. Although Colligan said though he understood that it is difficult when a respected employee leaves a company for a new challenge, businesses can not dictate where someone works.

"I can't deny people who elect to pursue their livelihood at Palm the right to do so simply because they now work for Apple, and I wouldn't want you to do that to current Palm employees," he wrote to Jobs.

During the year before the email exchange, Apple hired "at least" 2 percent of Palm's workforce, Colligan said. If Palm had hired the same percentage of workers from Apple in that period, that would have amounted to about 300 people, he said. "Instead, to my knowledge, we have only hired three."

"Threatening Palm with a patent lawsuit in response to a decision by one employee to leave Apple is just out of line," Colligan said, without identifying the employee. A lawsuit between the companies would not serve the interests of either of them and wouldn't stop employees from migrating between them, he wrote. "We will both just end up paying a lot of lawyers a lot of money," he said.

Colligan also said he was not intimidated by Job's threat, and pointed out Palm's own patent portfolio that could be used to file response claims.

"Ed, This is not satisfactory to Apple," wrote Jobs in an email response to Colligan. It was not just a matter of Apple employees deciding to join Palm. They were actively recruited using knowledge supplied by Jon Rubinstein, former senior vice president of hardware engineering and head of Apple's iPod division, Jobs wrote in August 2007. Rubinstein officially joined Palm as executive chairman of the board in October 2007 and replaced Colligan as CEO in 2009.

"We must do whatever we can to stop this," Jobs wrote in the email.

Knowledge about Apple employees was also supplied by Fred Anderson, a former Apple CFO, according to Jobs. Anderson joined Palm's board of directors at the same time Rubinstein became chairman.

"I'm sure you realize the asymmetry in the financial resources of our respective companies when you say: 'We will both just end up paying a lot of lawyers a lot of money'," Jobs wrote, adding that he was not impressed by Palm's patent portfolio. "We are not concerned about them at all. My advice is to take a look at our patent portfolio before you make a final decision here," he said.

Hewlett-Packard purchased Palm for US$1.2 billion in an all-cash deal in 2010.

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